Franchisor convicted under the Acquisition Fraud Act
For the first time, a court has ruled, with reference to the Acquisition Fraud Act, that if a franchisee claims that the franchisor has presented an unsatisfactory forecast, the franchisor must prove that the forecast is sound. Our office has represented the interests of the franchisee in court in this regard. The court ruled that the franchisee may appeal to a reversal of the burden of proof pursuant to the Acquisition Fraude Act (Section 6:195(1) of the Dutch Civil Code). This reversal of the burden of proof also applies to situations prior to the introduction of the Acquisition Fraud Act on 1 July 2016, according to the court.
The problem with forecasts that do not materialize is that it is often difficult for franchisees to determine why the expectations raised are not being realised. If a franchisee suspects that a mistake has been made by the franchisor, this will be difficult for the franchisee to prove. Cooperation from the franchisor cannot always be counted on and the franchisor may refuse to divulge trade secrets. The Acquisition Fraud Act came into effect on 1 July 2016 for these and other issues. If there is a sufficiently substantiated argument that there is a case of deception, the burden of proof can be reversed. If the evidence is not successful, the wrongful act can be established.
The court of Zeeland-West-Brabant recently applied the Acquisition Fraud Act for the first time to a forecast issue. The franchisee had accused the franchisor of having acted unlawfully by providing an unsatisfactory forecast. The franchisor was then sentenced to prove that the prognosis had been drawn up properly.
Although the Acquisition Fraud Act entered into force on 1 July 2016, the court ruled in its judgment that the reversal of the burden of proof also applies to forecasts issued before 1 July 2016. The court considered that the legislator did not make any distinction at the time of entry into force in the applicability of the provisions to agreements concluded before or after the entry into force of the law. According to the court, freely translated, this would moreover fit within the legal opinions already applicable in the Netherlands about the franchisor’s duty of care.
mr. AW Dolphijn – Franchise lawyer
Ludwig & Van Dam Franchise attorneys, franchise legal advice. Do you want to respond? Go to dolphijn@ludwigvandam.nl .
Other messages
Article The National Franchise Guide – “Corona discount of 50% on the rent” – mr. AW Dolphijn – dated September 15, 2020
Disappointing turnover due to the corona crisis may mean that the rent is halved, even if the rent is partly turnover-related.
Article Franchise+ – “Franchisor uses “derivative formula” (without his knowledge)” – mr. AW Dolphijn – dated September 9, 2020
Many franchisors will not be aware of the fact that they use a "derived formula" as referred to in the Franchise Act.
Article Franchise+ – “Obligations and rights of the starting franchisee” – mr. AW Dolphijn – dd
What should you pay attention to as a starting franchisee, what are your obligations and what are your rights when concluding the franchise agreement?
Article Mr. C. Damen – Three conditions for the right to customer compensation for the agent upon termination of the agency agreement – dated August 26, 2020
In the agency relationship between an agent and a client (the principal), the parties record their cooperation agreements in an agency agreement. When the principal enters into the agency agreement
Article Mr. C. Damen – “When does the obligation to provide proof apply for the submission of the franchise agreement?” dated August 17, 2020
Does the obligation to produce information apply to showing a (franchise) agreement in proceedings if the parties to the proceedings do not have a legal relationship to the (franchise) agreement?
Article Mr. AW Dolphijn – “How do you value a franchise company with a discharge loan?” – dated August 14, 2020
A discharge loan is a proven means of franchisors to find long-term franchisees.